Weekly wrap: tempting rally leaves shares potentially overbought
WEEKLY MARKET REPORT
Has the Australian share market got ahead of itself?
That is the burning question after we posted the best weekly gain for this year on the back of a very strong session on Wall Street as US President Donald Trump continues to reconsider his punitive tariffs on China.
By the close of weekly trading on Thursday before the Anzac Day holiday, the ASX 200 had risen 0.6% or 47.7 points, to close at 7968.2 points – leaving the 8000-point mark well within reach.
If anything, things were even more impressive on the US market with three days of gains having pushed up the S&P 500 by more than 6% since the end of trade on Monday night.
The S&P 500 has now risen a full 10% since it hit bottom on April 8 and is just 3.2% below where it closed on April 2 as Donald Trump got ready to present his “liberation day” tariff speech.
Tech names rally hard
One of the keys to the US market renaissance has been an amazing surge in the price of the “magnificent seven” technology stocks – Apple, Amazon, Alphabet, Microsoft, Meta Platforms, Nvidia and Tesla.
As a whole, they surged an amazing 10% in just three days of trading.
With the trade embargo between China and the US showing few signs of resolving quickly and no sign of other deals on tariffs emerging with other trading nations, the burning question has become, is the market rising on hope rather than a probable outcome?
Back here in Australia, the weekly gain of 2.3% seems more modest with eight of the 11 sectors rising at the end of the holiday shortened trading week.
Gold stocks once again rebounded impressively with Emerald Resources (ASX: EMR) shares up 3.3% to $4.04 and Newmont (ASX: NEM) shares up 3.5% to $85.20 as investors managed to look past a 19% fall in the US gold miner’s quarterly output.
The big Australian miners also rose as iron ore jumped closer to $US100 a tonne, with BHP (ASX: BHP) shares rising 0.9% to $38.06.
At the other end of the traditional Australian share barbell, the big banks also rose, with Westpac (ASX: WBC) shares up 1.1% to $32.04, ANZ (ASX: ANZ) shares up by 1.6% to $28.84 while Commonwealth Bank (ASX: CBA) shares continued their strong run, up 0.6% to $164.72.
Energy stocks remained a weak spot as oil prices hovered near a two-week low on the back of reports that OPEC+ is considering a further supply increase.
Shares in index heavyweight Woodside (ASX: WDS) set the trend, down 2% to $20.01.
Uranium stocks buoyant
Uranium shares were heading in the opposite direction, with Paladin Energy (ASX: PDN) up an impressive 12.1% to $5.56 on the back of an earlier 24.6% rise on Wednesday after it posted record quarterly production at its Langer Heinrich mine.
Joining the uranium party were shares in Boss Energy (ASX: BOE) and Deep Yellow (ASX: DYL) which both rose by more than 8% to $2.83 and $1.03, respectively.
ResMed gets a tariff exemption
Also bullish were shareholders in sleep device maker ResMed (ASX: RMD) who enjoyed an 8.5% rally to $36.08 after getting an exemption from Trump’s tariffs.
Not so lucky were shareholders in life insurer Generation Development (ASX: GDG) who saw their investment sink by 14.9% to $4.13 after a trading update in which assets under management were below what investors had been expecting.
Shares in PWR Holdings (ASX: PWH) dropped 5.7% to $6.32 after the company announced that founding chief executive, Kees Weel, was taking temporary medical leave to seek treatment for an acute condition.
Small cap stock action
The Small Ords Index inched 0.33% higher for the week to close at 2996.0 points.
ASX 200 vs Small Ords
The week ahead
There is no shortage of announcements this week that could move markets, with no fewer than three inflation updates for the March quarter being released here in Australia.
The most important of these will be the Reserve Bank’s preferred measure of core inflation – the trimmed mean – which is expected to reach 0.6% for the quarter taking the annual measure down from 3.2% to 2.8%.
If that sort of fall eventuates, it will increase the chances of the Reserve Bank lowering official interest rates for the second time in May.
In the US, inflation results are also announced along with economic growth numbers which are expected to show a significant slowing in that economy.
One of the key things to keep in mind here is whether the Federal Reserve’s preferred measure of inflation – the core PCE price index – is weak enough to prompt consideration of an official interest rate cut at the Fed’s next meeting.
Any cut would please President Trump but the under threat chairman Jerome Powell is sure to resist any sign of reducing his political independence.
A swag of US quarterly profit announcements will also help to determine whether the market keeps rising, depending, of course, on what the companies announce.
Naturally any news on the progress or otherwise of negotiations around tariffs will dominate the environment for world share markets.